Steps To Success - What To Know Before Reaching Out To An Investor!
The investment world is harsh and if you are not good at counting numbers well, it may get worse
If you want to witness the desired growth and acceleration in your business, leveraging the knowledge, expertise, connections, and capital advantages of an investor is undoubtedly one of the best things to do. It can bring drastic changes to your business and can upsurge your revenue numbers for sure.
But the questions that one must contemplate over and over again before standing in front of an investor are; How do you get to know what are the investors looking for? How do you ensure that they believe in you? What can be the perfect time to approach them? How do you reach out to them? An entrepreneur must be cognizant of an investor’s preferences and beliefs. Not only this, but the entrepreneur must also be aware of their own end goals like determining if you are looking for cash flow and if yes, how?
All investors are not the same. Some believe in being your strategic partner alongside and boost your business way more than just injecting capital flow and some are just the investors providing capital for the returns.
Let’s have a look at a few things that can help entrepreneurs to know how an investor can be tapped at the right time, fostering overall business growth.
Know Your Pre-Investment Game
To find your early investor, having a good blend of timing and hold of a good match is unquestionable. Cold leads are not always a good idea, howbeit, exploring networks and understanding who your potential investor can be is a good way to start.
Capital raise is crucial indeed, however, having an execution experience beforehand is quite beneficial. Get MVP before thinking of raising capital and keep a record of all things. Most of the investors like revenue-generating ideas, who can pay them well now instead of getting returns at later exits.
Build An MVP People Can See
Once you have an MVP and a sorted plan, go and start raising capital by pitching your ideas at different platforms in front of the right investors (I stress on finding the right investor, period). Not only this, be upfront about all the theories and business risks involved in the model. Tell them what all are the opportunities and how do you plan to grab them at best. Listing the risks involved helping the investors in knowing how well you are involved with your business model and how much understanding do you have about the challenges involved in the business.
Get On The Investment Philosophy
That is one of the reasons most of the investors like companies which are generating revenue already as they have a track record in hand to show. When someone is at the investment stage, proper valuation of the company must be known. It is okay to project that future earnings are going to be in millions, but do not forget to showcase what have you done so far!
Investors may like the founders and the whole team, but if the numbers are not good enough, or if the P&L statement doesn't talk the language of investors, your great pitch deck may go to ‘no-use’ bin. The investment world is harsh and if you are not good at counting numbers well, it may get worse.
Be ready with explaining EBITDA and make it quite clear for your investors. Know how you want them to pay you and understand the whole valuation deal at its best.
Investors are interested in all the things an organization funded by them is doing. They want to know updates on your business and strategies every week or forth-nightly and how passionate are you for taking the idea to a next level. Also, as a business person, you must understand that there are perspectives for every project; cash flow or the dividends for the investors. It is completely different if you are raising money for a small business vs if you are on to raising capital for a fund.
Know your business and get a hold of post-investment philosophy. You might be a small business, where you have to pay your advisors/experts on a monthly basis to have a clear view of your P&L statements or you may need to have an exit strategy if you are in to say, e-commerce business, where investors don’t really care about monthly dividends.
The Bottom Line Is
Having a vision is a great start, but do not forget about the importance of strategizing your plan to turn the ideas into a revenue-generating business model. Before standing in front of the investors, ensure that you are clear about the model, come up with an MVP to showcase your idea, ensure you are talking numbers, be clear about the investment plans and choose the right investors, and what not!
Investors want to see how real you are with your idea and how passionate you are towards turning it into something big. Dream big!
Anjli is the Managing Partner at EVC Ventures, a $50 million fund focused exclusively on early stage investments in Ad Tech, E-Commerce, Gaming, Education, Mobile Apps, Enterprise Software, Wearables, IoT etc.
Born in India and raised in the United States, Anjli attended the prestigious Horace Mann School in New York City and later received her Bachelor of Arts degree in Anthropology from Columbia University in the City of New York. She supports organizations such as - Inspiration Corporation and Chicago Foundation for Women.